New IRD number application process for offshore persons

Tax Alert - October 2015

On September 2015, two new acts, the Land Transfer Amendment Act 2015 and the Tax Administration Amendment Act 2015, received Royal assent.  A special report has been published on the measures in the Acts, in advance of comprehensive coverage in the next Tax Information Bulletin.

The new legislation, announced as part of Budget 2015, is part of a suite of measures aimed at providing clearer rules and more useful information to Inland Revenue to assist in its enforcement of taxation of property rules.

The three legislative measures to implement this (not aimed at a New Zealand person’s main home) will apply from 1 October 2015:

  1. Information will be required to be supplied to Land Information New Zealand upon transfer of property as part of the usual land transfer process. In particular, persons transferring any property (other than New Zealand individuals transferring their main home) must provide:
    a.     Their New Zealand IRD number; and
    b.    Their tax identification number from their home country if they are currently tax resident overseas.
  2. To ensure that New Zealand’s full anti-money laundering rules apply to non-residents before they buy a property, offshore persons must have a New Zealand bank account before they can get a New Zealand IRD number.

To this end, Inland Revenue has already published new forms on its website for non-residents who need to apply for an IRD number post 1 October 2015.  These are the “IR742 - IRD number application - non-resident/offshore individual” and the “IR 744 – IRD number application - non-resident/offshore non-individual”.  These forms reflect the new requirements, such as the need to have a fully functional New Zealand bank account before an IRD number will be granted.  The new rules, specifically the need for a New Zealand bank account, will therefore have wide application to all non-residents requiring IRD numbers going forward whether or not they are buying or selling property.  

For example, non-residents wanting to register for GST in order to claim back GST or those wanting to operate a New Zealand branch will need a New Zealand bank account, even if no commercial need to have one.

Whether this is deliberate or an unintended consequence of the rushed in property related measures remains to be seen. Officials note in the special report that the need to provide evidence of a fully functional New Zealand bank account is to ensure that an offshore person seeking to obtain an IRD number has first been subjected to New Zealand’s anti-money laundering and countering financing of terrorism rules. It should be noted that New Zealand residents can continue to use the original IR 596 application form.

Readers will also be aware that a new “bright-line” test for sales of residential property, to supplement Inland Revenue’s current “intentions” test, is also proposed.  Under this new test, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement (for more information see previous Tax Alert issues). 

The bright-line test is contained in a separate bill – the Taxation (Bright-line Test for Residential Land) Bill which was introduced on 24 August 2015.  Submissions closed on 17 September and last week the FEC began to hear submissions on the proposed test.  This bill is scheduled to be reported back to the house in late October.

If you have any questions in relation to the above or wish to explore the details further, please don’t hesitate to contact your usual Deloitte advisor.

Did you find this useful?